Abstract

Why should differences between regulatory and accounting policies be mitigated? Because mitigating such differences could facilitate convergence – as well as financial stability.

The paper “Fair Value Accounting and Procyclicality: Mitigating Regulatory and Accounting Policy Differences through Regulatory Structure Reforms and Enforced Self Regulation” illustrates how the implementation of accounting standards and policies, in certain instances, have contrasted with Basel Committee initiatives aimed at mitigating procyclicality and facilitating forward looking provisioning. The paper also highlights how and why differences between regulatory and accounting policies could (and should) be mitigated.

This paper focuses on how recent regulatory reforms – with particular reference to the Dodd Frank Act, impact fair value measurements. Other potential implications for accounting measurements and valuation, will also be considered. Given the tendencies for discrepancies to arise between regulatory and accounting policies, and owing to discrepancies between Basel III and the Dodd Frank Act, would a more imposing and commanding role for international standards not serve as a powerful weapon in harmonizing Basel III and Dodd Frank – whilst mitigating regulatory and accounting policy differences?

Item Type:

MPRA Paper

Original Title:

Harmonising Basel III and the Dodd Frank Act through international accounting standards: reasons why international accounting standards should serve as “thermostats”

Laux C and Leuz C, „Did Fair Value Accounting Contribute to the Financial Crisis?“ ECGI Working Paper Series in Finance, Working Paper No 266 October 2009 <http://papers.ssrn.com/sol3/papers.cfm? abstract_id=1487905>

Moreno R, „Policymaking from a Macro prudential Perspective“ BIS Working Paper No 336, January 2011

Scott H, „Reducing Systemic Risk Through the Reform of Capital Regulation“ Journal of International Economic Law 13(3) at pages 766-767.

Tarullo D, “The Volcker Rule” Testimony before the Subcommittee on Capital Markets and Government Sponsored Enterprises and the Subcommittee on Financial Institutions and Consumer Credit, Committee on Financial Services, U.S. House of Representatives, Washington, D.C. January 18, 2012 http://www.federalreserve.gov/newsevents/testimony/tarullo20120118a.htm

Walter S, Secretary General of the Basel Committee on Banking Supervision at the Risk Europe Pre Conference Summit, Brussels 4 April 2011.